The US dollar has rallied slightly during the early hours here on Tuesday as we are sitting at a major bottom that could open up. This is a market that continues to pay you for being short.
USDMXN
The US dollar has rallied slightly during the early hours here on Tuesday as it looks like we are trying to sort out whether or not we can break down from here. Any rally at this point in time could open up selling pressure at the first signs of exhaustion.
The 17.5 level above is a massive barrier that I think a lot of people will be watching and I quite frankly don't think that the market can break above there very easily. Any rally that shows signs of exhaustion I think will continue to attract people to short this market and quite frankly they should.
Exhaustion Signals and Interest Rate Differentials
The US economy is doing fairly well, and Mexico is the largest exporter into the United States, so it bodes well for the Mexican peso. The central bank in Mexico has much higher rates than the Federal Reserve and the Federal Reserve is expected to cut a couple of times this year thereby spurring more demand in the US economy and beyond.
It's a feedback loop if you will. The interest rate differential continues to get you paid if you are short of this pair and I do plan on staying that way.
If we were to break above the 50-day EMA, then maybe we can challenge 18 pesos which I think would be a very stark change of attitude but right now I just don't see it. I think we continue to consolidate with 17.5 being the top and then eventually make a move towards the 17 level underneath.
Ready to trade our Forex daily analysis and predictions? Here are the best forex brokers in Mexico to choose from.